The Future for Power Sector Regulation in Ontario

Jan Carr

Vice Chair, Ontario Energy Board

APPrO Canadian Power Conference & Trade Show

November 24, 2004

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Overview

• Approach to Economic Regulation

• Major Electricity Initiatives – Regulated Price Plan (RPP)– Smart Meters– Electricity Distribution Rates (EDR)

• Natural Gas Forum– Gas-fired Power Generation

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Approach to Economic Regulation

GOALS

• Facilitate infrastructure investment

• Create incentives linking profit and performance

• Protect consumer interests

TOOLS

• Approving expansion of infrastructure

• Setting utility rates

• Initiating consumer protection mechanisms

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Regulated Price Plan (RPP)

• New mechanism to determine electricity commodity price – May 2005

• RPP will reflect true cost of electricity

• RPP will be stable and support conservation / smart meters

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RPP Components

• OPG baseload nuclear and hydro plants

• Existing NUG contracts

• New OPA procurement contracts

• Forecasting of IESO spot market prices

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RPP Milestones

Milestone Target date

“Strawman” issued for comment and workshops

November-December 04

Initial draft RPP code issued for comment and technical conference

December 04- January 05

Final RPP code issued February 05

Implementation testing/dry runs – RPP code; amendments to LDC rates orders/licences

March 05

Final testing of RPP code April-May 05

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Smart Meters

• Implementation target is tight– 800,000 customers by 2007; all customers by 2010

• OEB draft implementation plan released November 9

• Comments due on November 26• Key issues:

– Installation priorities– Procurement– Cost– Technology

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Electricity Distribution Rates

• Dealing with backlog of issues from rate freeze in 2005.– Continued recovery of transition costs– 3rd (final) installment of MARR – tied to spending on

DSM

• Working to establish a sound basis for future incentive rates– 2006 - Establishment of new revenue requirement– 2007 - Initial cost allocation– 2008 - Further review of revenue requirements

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Natural Gas Forum (NGF)

• Technical consultations identified a number of key issues in natural gas sector

• Research and discussion in three areas: – Utility system supply– Storage and transportation– Rate regulation, with a focus on Performance-Based

Ratemaking

• Forum raised issues of operational requirements of power generators

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Issues in Gas-Fired Power Generation

• Increased demand on natural gas infrastructure to supply expected gas-fired power generation

• Issues raised in NGF:– Distribution rate structure– Storage and transportation flexibility– Contract arrangements– Infrastructure and distributor arrangements

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Conclusion

www.oeb.gov.on.ca